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Dynamic business law 4e kubasek 4e CH04

Chapter 4
Alternative Dispute Resolution

Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.


• LO4-1: What are the primary forms of alternative dispute resolution (ADR)?
• LO4-2: What are other ADR methods?
• LO4-3: What is court-annexed ADR?
• LO4-4: How is ADR used in international disputes?


Chapter 4 Hypothetical Case 1

Todd Elgin was a quality control supervisor, with the emphasis on was. Last month, his employer, Synergy
Mechanical Controls, Inc. had terminated his employment due to Elgin's violation of the company's

attendance policy. With no employment prospects on the horizon, Todd has considered bringing a wrongful
termination action against his former employer. By his own admission, Elgin had indeed violated the
company's attendance policy, but there were at least six co-workers within his own department who had
done the same. All of his co-workers still had their jobs.
Last week, Elgin called Synergy's human resources department, stating he would bring a civil action for
wrongful termination of employment if the company failed to reinstate him. Synergy's human resources
manager, Keith Martin, told Elgin the company would not reinstate him, and that he could not pursue a civil
action against the company, since all employees (including Elgin) were required to sign a binding arbitration
agreement as a condition of employment. Martin informed Todd that the original, signed arbitration
agreement was in his employment file.
Elgin is frustrated. He would like to pursue a civil action, and does not believe the binding arbitration
agreement is enforceable, since he believes he was coerced into signing it. After all, the company would
have refused to hire him had he not signed the agreement. Further, Elgin is skeptical concerning the fairness
of binding arbitration. As part of the arbitration agreement, the company had reserved the right to select
the arbitrator, and would compensate the arbitrator for his services.

What is the likelihood that the arbitrator would find in his favor, given the fact that the arbitrator's check for
services rendered would come from Synergy? Advise Elgin on the enforceability of his binding arbitration
agreement with Synergy.


Chapter 4 Hypothetical Case 2

Ted Henry, trial court administrator of the Ticonderoga County, New York court system, has grown tired of all of the relatively trivial cases plaguing his county's court dockets. In Henry's opinion,
everyone wants to exercise their right to sue these days, even when the amount in controversy is comparatively trivial; in Ticonderoga County, the number of cases valued at less than $10,000 has
doubled in the past ten years.

As a trial court administrator, Henry has been especially affected by the increase in litigation. The county's financial resources are limited. It has become increasingly challenging for Henry to manage
the trial court docket each week with only a limited number of judges, bailiffs, trial transcriptionists, and other key court personnel available. Henry knows that when it comes to the courtroom, time
is definitely money, and local taxpayers have not warmed to the idea of hiring more judges and other court personnel to respond to the onslaught of increased litigation.

Henry has what he believes to be a "modest proposal." He would like to implement binding arbitration for each case involving an amount in controversy of less than $10,000 (In binding arbitration,
the arbitrator's decision is final and non-appealable). As part of his proposal, the parties involved in the litigation would pay for the expenses of arbitration, and select the arbitrator. In law school,
Henry's first-year torts professor had told his class that there was no guarantee of justice in the courtroom. Henry believed that his professor had been correct in that assessment; after all, there
were too many contingencies and variables in the courtroom to guarantee justice, including the effectiveness of legal counsel, the proclivities of the judge presiding over the case, and the makeup of

the jury. In Henry's view, who is to say that justice would not be better served in a case if a neutral, experienced arbitrator was involved in the dispute resolution, as opposed to a judge and jury in a
traditional courtroom? Henry is excited about his proposal, since (if implemented) it would dramatically reduce the number of cases processed through the Ticonderoga County judicial system,
thereby saving the taxpayers' money, and Henry's sanity!

Is Henry's proposal, for binding arbitration in all civil cases involving less than $10,000 in controversy, legal? Is it ethical?


Alternative Dispute Resolution (ADR)

• Definition: The resolution of legal disputes through methods other than

litigation, such as negotiation, mediation, arbitration, summary jury trials,
mini-trials, neutral case evaluations, and private trials


Questions to Ask When Selecting a Dispute Resolution Method

How concerned am I about keeping costs low?
How quickly do I want to resolve the dispute?
Do I want to keep the dispute private?
Do I want to protect the relationship between the disputing parties?
Am I concerned about vindication?
Do I want to set a precedent with the resolution of my dispute?


Primary Forms of ADR

• Negotiation
• Mediation
• Arbitration


Advantages of Arbitration

• More efficient than litigation
• Less expensive than litigation
• Parties have more control over the process of dispute resolution (parties

choose the arbitrator and determine how formal the process will be)
The arbitrator has greater flexibility in decision making than a judge has.


Disadvantages of Arbitration

Scheduling difficulties and costs associated with arbitration panels (versus the use of one arbitrator)
Difficulty of appealing an arbitration award
Loss of civil rights and remedies available through litigation
Trend toward arbitration may reduce its efficiency
Companies and employers may effectively "hide" their disputes through arbitration (non-public nature of
arbitration versus public trial)


Tips for Creating a Binding Arbitration Clause

Be clear and unmistakable
Ensure that the arbitration clause is bilateral
State explicitly which party will pay the arbitrator's fees, and make sure that it will not cost the employee
more to arbitrate than it would have cost to litigate

Specify how the arbitrator will be selected
Specify the costs associated with the arbitration
Avoid limitations on the remedies available to the parties
Consider other potential parties when determining where to hold the arbitration


Other ADR Methods

• Mediation-arbitration (med-arb)
• Summary jury trial
• Minitrial
• Early neutral evaluation
• Private trials


Court-Annexed ADR

• District courts can decide whether to require ADR
• Some mandate it, others make it voluntary
• Some refer almost all civil cases to ADR

• Mediation: Primary ADR process in federal district courts
• Judges or lawyers are mediators

• ADR may be used to resolve particular disputes within cases
• Appellate courts use it to resolve issues on appeal


ADR's Use in International Disputes

• Litigation challenges in international disputes
• What should the venue be?
• Who should decide the case?
• What types of awards should be given?

• ADR is preferred


Chapter 4 Hypothetical Case 3

Law student and New York resident Cecilia Newcomb found herself frustrated when she tried to transfer Broadway show tickets she'd purchased electronically
from ticketing giant Top Ticket to a friend. The theater in question, Broadway West, had listed the tickets as non-transferrable, and so Newcomb's tickets went
unused, and she was out $500.

Newcomb decided to file suit against Broadway West, as she believed that the non-transferrable rule was a violation of the New York Arts and Cultural Affairs
law, which prevents venues from selling electronic tickets that cannot be transferred to other holders. Broadway West argued that since the tickets were sold
by Top Ticket, which in its Terms of Use agreement requires all ticket purchasers to agree to binding arbitration, Newcomb's beef was with Top Ticket, not
Broadway West—and that she should seek redress from Top Ticket through arbitration.

Do you believe that Newcomb has a case? Research the New York Arts and Cultural Affairs law. If you think that either Broadway West or Top Ticket is in
violation of the law, which—or both—are at fault? Why? Does Broadway West have a reasonable case that Newcomb should abide by the Top Ticket Terms of
Use? Last, why did Newcomb opt for a lawsuit over binding arbitration, no matter which company she brought the complaint against? Would you make the
same decision? Why or why not?


Chapter 4 Hypothetical Case 4

John Wilson, owner of Wilson Construction Company, and Andrew Carrigan, owner of Carrigan Brick and
Masonry, Inc., are at odds regarding a construction contract between the two companies. Wilson claims that
Carrigan breached the contract due to non-performance of certain masonry work; Carrigan defends on the
basis that Wilson did not permit him adequate access to the work site in order to complete the work by the
designated contract deadline. Wilson claims liquidated damages as a result of the breach; the contract
stipulates that upon breach, the non-breaching party is entitled to $1,000 in damages for every day the
work is not performed beyond the contract deadline.

Wilson is considering mediation or arbitration as an alternative to civil litigation, but he is concerned that
justice may not be served if he submits to a method of alternative dispute resolution. Are his concerns
justified? Is justice better guaranteed if Wilson and Carrigan litigate their case? Is mediation or arbitration
actually preferable to civil litigation? Regardless of what disputing parties prefer, should court systems
require that plaintiffs and defendants submit to arbitration or meditation before being entitled to their day
in court?


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